Sharechat Logo

Long-term damage of US-China trade ructions outweigh brief boost for NZ exporters

Friday 6th April 2018

Text too small?

Ongoing trade ructions between China and the US could create some short-term opportunities for New Zealand exporters but will be outweighed by the longer-term damage to global trade, analysts say. 


"It is a real concern that this tit-for-tat trade war seems to be escalating and the comments of the (US) President (Donald Trump) on measures to protect USA farmers and agricultural interests will be of concern to our agri-exporters," ExportNZ executive director Catherine Beard told BusinessDesk.


Earlier today Trump reiterated China’s "illicit trade practices - ignored for years by Washington - have destroyed thousands of American factories and millions of American jobs," in a White House statement published by MarketWatch. Rather than "remedy its misconduct, China has chosen to harm our farmers and manufacturers," said Trump. As a result, he instructed the US Trade Representative to consider whether US$100 billion of additional tariffs would be appropriate. 


In the same statement, Trump also instructed the Secretary of Agriculture "to use his broad authority to implement a plan to protect our farmers and agricultural interests". 


Rabobank analyst Blake Holgate said "short-term there is potentially some initial upside if NZ producers replace some of the US product in China," in particular for products like beef and wine.


China is New Zealand's largest export market according to the latest data from Statistics New Zealand while the United States is third, behind Australia. 


Holgate added, however, the benefit will depend to what extent China lets US product flow in through Hong Kong, which is so far exempt from the tariffs. He also said any benefit could be partly offset if US product is redirected into other markets to compete with New Zealand exports and notes there will be other suppliers looking to take advantage of available opportunities.


"Longer term, the damage to an open global trading environment is likely to outweigh any short-term gains," he said. 


Regarding exports to the US, Beard warned New Zealand could face additional hurdles as there may be "increased tariffs on agricultural imports from other countries to give local USA growers an advantage on the domestic market." 


Moody's Investors Service said in a note the "rising uncertainty and political risk accompanying these tit-for-tat measures will likely have economic and financial impact beyond that which is transmitted through direct trade channels." 


Any escalation will weigh on investor sentiment and lead to more financial market volatility. The result could be reduced business investment over the medium term and lower production efficiency, it said. 



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

NZ dollar falls with Aussie after Westpac's RBA rate cut call
Intuit juggernaut grows QuickBooks subscribers but momentum slows
Reaction to Budget rules relaxation shows balance 'about right', says Ardern
Augusta lifts net profit six fold as investors flock into new funds
Annual exports to China top $15 billion for first time
Gentrack posts $8.7M loss on CA Plus write-down
Westpac says RBNZ capital proposals would add $6,000 p.a. to an Auckland mortgage
Cavalier says market conditions still challenging
Ryman hikes dividend as annual earnings grow on wider development margin
24th May 2019 Morning Report

IRG See IRG research reports